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INVEST - Grant for venture capital

INVEST is twofold: On the one hand, it supports young innovative companies in the search for an investor. Second, it motivates private investors - in particular business angels - to provide venture capital for young companies.

How INVEST works

Individuals (private investors) who purchase shares in innovative start-ups will be promoted with an acquisition grant. The investment must be at least 10,000 euros per company. Each investor can apply for acquisition grants for share purchases up to 500,000 euros per year. Shares having a value up to 3 million euros per calendar year may be subsidized per company. The amount of the subsidy is 20% of the acquisition costs (incl. Agio).

Additionally, since 2017 capital gains can be granted with an exit grant to compensate the taxes paid on the profit on the sales of the shares whose purchase was promoted with the acquisition grant (natural persons only). The exit grant amounts to 25% of the profit. The shares must be sold within ten years and the total amount of exit grants must not exceed 80% of the acquisition costs of the acquired shares.

Better opportunities for the investors acquiring

Young companies will receive as part of its application a certificate of eligibility by INVEST. This certificate can be used in conjunction with information on the grants for the acquisition and exit of investors. In addition, the company can place the eligibility logo on their website and use it for presentations. This indicates their eligibility to potential investors and increases their chances of obtaining financing through venture capital. The logo is the company provided by the Federal Office of Economics and Export Control (BAFA). BAFA is responsible for processing applications and the certificate of eligibility.

Benefits for investors

For the investor, the risk of equity investment is reduced by INVEST. The investor receives 20 percent of the sum refunded, with which he participates in a young innovative company. The shares remain completely with the investor. If the investor sells the shares after a minimum holding period of three years or the company fails, the subsidy must not be repaid. In case of profitable disposal of the shares the exit grant is a lump sum compensation for a tax on capital gains and equivalent to an exemption from the capital gains tax.

Requirements to be met by the young company:

It must be a small, innovative and independent company (less than 50 employees and max. € 10 million annual turnover or annual balance sheet total), which is less than seven years.

The corporation has its head office in the EEA, with at least one branch or permanent establishment in Germany.

The company must be innovative, for example by belonging to an innovative sector. The company is also considered innovative if it either is the owner of an up to 15-year-old patent, which is directly related to the business purpose, or has received public support for a research or innovation project, in the two years preceding the application. The innovation of the company can also be proved by an expert opinion of an independent assessor listed on the website of BAFA.

Requirements to be met by the investor:

The investor must be a natural person with principal residence in the EEA, who is not connected to the start-up. Alternatively, the investor can purchase the shares in the company via a investment company (GmbH or UG). These investment companies may have up to six shareholders. The business purpose of the limited liability company must include the entering into and holding of investments. Other legitimate business purposes are private equity management and consulting.

The investor or the investment company has to keep the shares completely to at least three years after the signing of the partnership agreement (so-called Minimum holding period). It also has to be a first-time participation in the companies act (no increase of shares).

Since 2017 follow on investments are eligible as far as the shares holded by the investor have been promoted with the acquisition grant.

Also since 2017 shares can be acquired via convertible loans. In this case the acquisition grant is paid after the conversion.

Application procedure

Companies and investors make their own online applications to the Federal Office of Economics and Export Control (BAFA). The young company can either still be looking for investors or have already found an investor.